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I'm refinancing my house at the moment. We have great credit (high 700s). We're getting a 15 year fixed and have locked in a rate of 3.5%. Current market rate seems to be about 2.88%. The mortgage will use the same amortization schedule as the old mortgage which we're 3 years in to. This is a no cost refi, so the broker is adding to the rate to take care of the closing costs.

So what accounts for the difference between the posted rates and what we're getting? Is it because it's a refi vs new mortgage? How much does the broker add to pay closing costs? How does credit score affect rate (I'm guessing it doesn't in my case, but for general knowledge)? Does the amortization schedule affect the rate?

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    Check whether the 2.88% rate is for 30-year fixed mortgages or the current rate for ARM mortgages. – Dilip Sarwate Oct 26 '12 at 14:33
  • The 2.88% is for a 15yr fixed. Besides, if it wasn't, 15 year is generally the lowest rate, so that would make the difference even larger... – yossarian Oct 26 '12 at 15:20
  • I checked on bankrate, and at least for my area (NoCal), its nowhere near 2.88. 3.5% for a no-cost loan sounds about right. – littleadv Oct 26 '12 at 17:12
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    If you can't find a 15 year fixed rate mortgage for 2.88% then the market rate isn't 2.88%. – DJClayworth Oct 26 '12 at 20:46
  • Have you verified that new purchase mortgages are at the 2.88 rate? – JTP - Apologise to Monica Oct 27 '12 at 4:39
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You're getting a rate of 3.5% because that's what you agreed to. Mortgages are not sold on any kind of exchange that guarantees a best price to you; the "market rate" is often just talked about as a benchmark of where mortgage rates are on average throughout the US. Have you shopped around to see if other banks are willing to give you a better deal?

As some of the commenters have pointed out, rates can vary significantly based upon where you are. I was able to lock in 2.75% on a 15-year refi a couple weeks ago, but rates have inched back up a bit since then. A search on bankrate.com shows that I'm more likely to see around 3.0% in my area. Mortgage rates often move along with the 10-year Treasury bond yield; over the last month, there has been an almost 30-basis-point range in the 10-year's yield, which you would expect to add some volatility to rates.

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The market rate is for a loan with associated fees. Since you are getting a no-cost loan, the broker gets paid on the difference between the market rate and the rate that you are paying.

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